NFP Quick Analysis: Three reasons for dollar bears to party, even if tapering remains intact

  • The US economy has gained only 194,000 in September, far below expectations. 
  • Annual wage growth hit 4.6%, within estimates, showing no new inflationary pressures.
  • The broad market mood has improved, weighing on the dollar. 

Another month, another Nonfarm Payrolls disappointment – the US economy has gained only 194,000 jobs in September, far below 488,000 expected. Does it derail the Federal Reserve's upcoming tapering? Not so fast, as there are several silver linings – August's figure was revised up from 235,000 to 366,000. Moreover, many of the job losses were Delta-related, such as those in leisure and hospitality. 

Moreover, the Fed's bar for changing its mind is high. Despite high chances for the bank to print fewer dollars, there is room for the greenback to fall in the short term. 

1) Second disappointment: The headline figure not only badly missed estimates but fell short of them for the second consecutive time. That could push the greenback down. In addition, the participation rate dropped, another sign that the road to recovery remains long.

2) Wages meet estimates: Average Hourly Earnings came out at 0.6% MoM – higher than 0.4% projected – but downward revisions resulted in annual salary growth hitting 4.6%. That is exactly what economists had expected. Moreover, an increase in wages makes sense when there are fewer lower-paying hospitality jobs in the mix. Emerging from the Delta crisis – already happening – should push wages down later down the line.

3) Improving market mood: The US Senate kicked the debt ceiling issue down the road, Russia promised more natural gas to Europe, and a summit between the US and Chinese presidents is planned. While all these issues are far from being resolved, the sentiment is much improved and that is set to weigh on the safe-haven dollar. 

Overall, there is room for the greenback to decline for now – at least until Tuesday's fresh US inflation figures. 

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